Oh, and by the way, the deal that was "announced" over the weekend ISN'T exactly a "done deal" yet. It still has to be voted on by the Parliaments of the EU countries... The beat goes on...

And speaking of bad news, the OIL SPILL in the gulf appears to be A LOT worse than most people expect (and could prove to be quite problematic to put a fix to...

BUT STOCK FUTURES ARE UP (rolls eyes)... So just tune in to CNBC to have their people tell you which stocks you need to buy...

----(courtesy of Andy T - 5/2/10)

Good Evening Capitalists,

The S&P 500 seems poised for more downside over the next several weeks. The next several months are historically a poor time to be invested in the stock market. So, why be in it? Maybe we’ll get another repeat of last year’s stella’ performance across the summer and fall, but why bet large against 80 years of historical performance? Maybe the Fed’s Nuclear amount of easing and money will prevent any meaningful correction yet again this summer…

What will be most interesting in the next several weeks is the influence the Euro has on equities. Last year’s tight correlation between the Euro and equities has clearly been smashed. As of the latest Commitment of Traders, large speculators are holding significant short bets in the Euro. People like Dennis Gartman keep pounding away at the Long CAD/Aussie vs. Short Euro cross trade. When folks like him get all “frothed” up on a single trading idea, we’re usually due for some kind of correction, even if only temporary in nature.

I continue to be bearish the S&P 500 futures via 1200 strike puts. Those “worked” last week and I will continue to hold them. A break of 1208 on the June futures would force me out of the trade.

What if traders around the world run from their markets to the US markets for safety? I know our economy is a lie but until the time that's recognized the dollar and indices go up while there is increased buying of Treasuries. They could also go to cash or commodities. We already know how much the US markets are willing to ignore the truth so this lie could last longer than one would expect. JTOL.

May 3 (Bloomberg) -- The European Central Bank joined the international rescue of Greece, saying it would indefinitely accept the country’s debt as collateral regardless of its country’s credit rating, underpinning gains in the bond market.

For the uninitiated this means that the ECB will accept DEFAULTED Greek debt instruments, should it come to that.

More bluntly, if Papandreou's dog drops a deuce in a box and he presents it to the ECB claiming that it's worth $10 billion, the ECB will in fact issue $10 billion in real, honest-to-God Euros against that box - no matter how badly it smells.

That prompted Christoph Rieger, co-head of fixed-income strategy at Commerzbank AG in Frankfurt, to say today’s announcement “leaves a sour taste with regards to the ECB’s long-term credibility.”

The ECB has no credibility to lose at this point as it has now documented that the Euro is worth nothing at all as a currency, since it may be debased at will by Greece through the offering of worthless debt instruments into the ECB's clearing and margining system.

The Euro is now free to descend toward zero, targeting in the intermediate term my Par price-point .vs. the dollar, and likely headed for well below that.

Congratulations Europe, you have now demonstrated that your central bank is and has been issuing dog turds disguised as Euro bank notes.

If Germany has an ounce of sense they will withdraw from the Euro and return to the Deutche Mark post-haste.(from KD)

The day is still young but, quite frankly, if there was to be a resumption of the bull based on this news I would have expected much more fireworks. The fact the USD and the US markets are marching together also brings me to the same conclusion as last week that we are in the midst of a major trend reversal.

Haha CVYou are on fire today. In later news the ECB has said it will "create it's own ratings agency". How bad must you be that Moody's, S&P and Fitch don't even rate you.Credibility is evaporating fast in the eurozone.

I don't think there is anything rationale about what I've laid out. The very basis of the thesis doesn't appear rational to almost anyone: dollar is the worst currency, so get in it! Rational is preparing before things happen, not after. Those things I mention all come about as a result of panic. If people were acting rationally with regard to debt then we would have never had the RE bubble or this rally. I read Liar's Poker again over the weekend, even when that book was written there were major concerns about debt.

Governments worldwide are doing what they always do, acting on the old trend, the one that has already passed, the spending trend. You know it's always the last trend by the time the government is in on it.

As for people sitting back and "collecting checks", if that is what is going on it proves my point, there is no rationale to that at all, and those folks will be forced out of debt and into dollars, this isn't coming about by choice for most...they are all just herding.

I agree with you McF re the dollar safety trade.It's very easy for people, given what we have been through, to think that it is worse where they are tan anywhere else.Truth is most places have massive debt but the US is at least deflating its housing market whereas Europe, UK, Canada, Australia, China are still in full on bubble mode. The EUR is 50% of the dollar index and they are in dire straits because they do not have the tools to create a "one size fits all" solution.I am a big time dollar bull because the US has the tools to fix its problems, it is deleveraging *relatively* well and has the best capacity for growth of any old money currency (outside of emerging markets like Brazil).Lately the dollar has done really well on good US economic news and OK on risk off periods. win-win.

the deleverging is the key. If I were smart enough I'd develop a program right now that tracked deflation in the debts of each currency (euro debts, yen debts, dollar debts, etc), you are long in those deflating the fastest or doing pairs trades and stocks are just an afterthought. This is part of the reason I wonder if the Yen is a great long against AUD, for example.

As for stocks, the DOW yield is so low it's only been seen at tops two times in the last 100 years, 2000 and 2007. At the top in 1929 the yield was 2.9%. Who is looking at us and allocating capital here based on safety, especially if you are trying to "invest" for the "long term"?

Lots of wavers were looking for an immediate continuation down to start today, so that didn't play, otoh, we haven't fully retraced the recent decline which looked impulsive despite the "bailout news" over the weekend.

It's likely we do Andy's correction of a correction of a correction chart for a little while here, perhaps all week.

Well, this has certainly become interesting (the marekts, not LB and K but that is certainly interesting as well). Leave for a couple of hours or so and this happens. I'm not convinced by the action. The EUR has been taken behind the woodshed by Bucky. Given bank holidays around the world and the unusual correlations, me be skeptical.

I'm saying all the things that I know you'll likeMaking good conversationI gotta handle you just rightYou know what I meanI took you to an intimate restaurantThen to a suggestive movieThere's nothing left to talk aboutUnless it's horizontally

"The video featured a lusty Olivia, dressed in a tight leotard, working out in a gym with several overweight men, who eventually transform into attractive muscular young men. The gym setting may have been partly an attempt to divert attention from the overt sexual connotations of the term "physical". This was further emphasised by the twist comedy ending of the video, when the transformed men who are now oblivious to Newton-John's advances are ultimately revealed to be gay (this was also a source of controversy; MTV frequently cut the ending when it aired the video, and the sometimes sensuous nature of the video also led to it being banned outright by some broadcasters in Canada and the United Kingdom). The video won a Grammy Award for Video Of The Year in 1983. The song was banned in South Africa for its suggestive lyrics."

volume sucks again today, we'll get the cash/assets report for MF's soon, should be at all time lows in cash, if bulls are tired now then that isn't a good sign, retail isn't coming back....

The market can set itself up here for a new top without the breadth we just saw the last few weeks when NYSE had over 600 new highs rivaling figures seen in the middle of our last "bull market" as well as 1998, I would imagine a new top will make sentiment ever more extreme toward the bulls, if breadth has divergence as well then all the parts will fall in place much like they did in January, time ratios will be in play as well. At minimum a larger correction should then take shape, this time I *hope we can count five waves though.

China is in a bubble, I'm quite convinced of that, I'm not really in the position for a trade, so to speak. Also, for the benefit of blogger land, if I lost everything I went short china with, I won't be happy, but I'll be just fine, and back looking at the next trade the following day.

Maybe C will do a thread someday but I read BR's stops post with interest over the weekend. I actually use stops fairly rarely.

KarenThere was an interesting article at FTalphaville this morning about that. Normally last day of the month the dogs do well as portfolios are rebalanced and the story is basically about Fed swap lines and why the dollar didn't do much worse:http://ftalphaville.ft.com/blog/2010/04/30/216871/fx-gyrations/

They are a free lunch for the people arbing them, on the way up. On the way down, there are not many people that are going to be 'taking shares out' of the market.

On the way up(in the eyes of the arb fund)-Yeah, sure, I'll sell a bunch of JNK shares, go out and buy the underlying and make the spread.

On the way down- Who buys those shares? In perfect capitalism, someone buys the shares at a discount and then sell the underlying at a premium. In a falling market this is very dangerous, the fund would have to take the risk on of owning the junk on the way down.

indeed, and great post there at 2:12, it should be required reading for people that think we are always in equilibrium. That's how "values" vanish.

@I,

stops have ruined some of my best trades just before the trade worked out in my favor. What I have learned is that they did work for me when I had a shitty count on that I was projecting. I've learned when I'm in that space it's better to do nothing at all. I've got a lot of issues with stops as a matter of fact.

To summarize, the perceived chance of a rate hike has been declining as of late, not rising. Given this reaction from the Fed funds futures pit, it’s hard to blame the rise in LIBOR on strong economic growth and the expectation of future rate hikes by the Fed. It’s much more likely that LIBOR is reacting to counterparty risk rearing its ugly head once again. It may still be early, but perhaps Greece is the Lehman of 2010.

Had an interesting weekend. Got to the salt mine this morning and the ceiling to my office had fallen in. Got a new computer, screen, will have new carpet, etc. Our lab is right over my office and the ultrapure water filtration system had leaked all weekend, and c'est la vie to the ceiling.

But all is better now. I think. At least I'm not in Nashville, or on the coast. And I read the prognosis on the spill, thanks CV. I bet it will be a real b@@@@ to cap this sucker.

@DL: Me neither. Maybe once a month but if I was still living in NYC, I'd probably be eating far more just because pizza is everywhere and a slice is way too convenient. Here, it's hard to get just a slice or two. Have to buy the whole pie and the crust (and pizza) overall just isn't as good. Not even close. Same with bagels. Hardly eat those anymore either for the same reason.

Tomorrow will be most interesting to sift through this sh*tty mess. Sh*tty volume today, sh*tty other markets closed due to sh*tty holidays, sh*tty conviction on the bull side (witness sh*tty bounce back of Goldman Sh*ttysachs), sh*tty news reported as the sh*t, sh*tty dollar and sh*tty stocks rising together, and finally the Greece/EU situation is still sh*tty. Overall a sh*tty day.

An overview Levin would be damn sh*tty proud of. Still long FAZ and FXP - looking forward to bear raids on banks again and China markets re-opening with vengence to rate hikes.

LB is fresh back from doing 200 sit-ups Karen, which have made his portfolio look considerably slimmer, as bonds of all shapes and sizes were sold off as investors departed the safe positions they had adopted last week. Today was a typical Magic Monday of little significance.

One presumes that the selling was in anticipation of a shining new era in Hellenic Investment, which seems guaranteed to last until next week's long bond auctions, thereby enabling banks to dump a few Ts before beginning another Grecian panic at the end of the week.

Post a Comment

Disclosure/Warning

This blog should not be interpreted as investment advice of any kind.The authors are NOT representing themselves CTAs or CFAs or Investment/Trading Advisor of any kind.The authors may or may not trade in the markets discussed.The authors may hold positions opposite of what may by inferred by this blog.The information contained in this blog is taken from sources the authors believes to be reliable, but it is not guaranteed by the authors as to the accuracy or completeness thereof and is presented here for information purposes only. Commodity trading involves risk and is not for everyone.

Fictional Character Quote of the Day:

I guess it comes down to a simple choice. Get busy living or get busy dying.

- Andy Dufresne

"The Shawshank Redemption"

About this Blog

This Blog's primary focus is on trading based upon technical analysis. It is run by "AmenRa" and "AndyT," quasi-anonymous traders who employ technical analysis to assess market conditions and trading opportunities. AmenRa utilizes 3LB techniques, Moving Averages and Fibonacci sequences. AndyT's analysis relies primarily on "Wave Theory" and Fibonacci sequences. The Comments Section is uncensored and open to the public. Please try and adhere to the "Blogger Policy."